Answered: With reference to the facts above:…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The accounts for this income year show the following:
Income ($)
Sales (excluding GST) 240,000
Expenses ($)
Cost of goods sold 130,000
Interest on capital paid to Richard and Tracy 8,000
Salary to Alice 25,000
Superannuation to Alice 6,000
Lease payments on car (excluding GST) 7,000
Other deductible operating expenses (excluding GST) 14,000
The leased car was used 80% of the time for business and 20% of the time for private purposes.
Required:
With reference to the facts above:
A.Calculate the net income of the partnership.
B.Show the allocation of net income to each of the three partners.
C.You must refer to relevant legislation and/or case law in your answer.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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